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Unlocking the Obstacles: Expediting Public Investment Capital Disbursement from ODA Sources in Localities

6 December, 2024

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Conference with localities on the disbursement of public investment capital from foreign sources in the last months of 2024 – Photo: VGP/HT

According to a report by the Department of Debt Management and External Finance (Ministry of Finance), in 2024, localities were assigned a total plan of foreign borrowed capital of VND 24,805.39 billion, of which investment capital (capital from the state budget allocated to supplement the local budget) was VND 10,094.79 billion. The plan capital assigned to localities in 2024 was much lower than in 2023 (only 70% of the 2023 capital plan), corresponding to the number of projects with assigned capital plans in 2024 was also only 58.3% of that in 2023 (98/168 projects).

According to statistics, as of November 30, the disbursement rate of public investment capital from foreign borrowed sources (including both central-allocated capital and local re-borrowed capital) reached 30.3% (higher than the same period in 2023, which was 24.89%). However, this disbursement result is still quite low, making it difficult to meet the requirements set by the Prime Minister (striving to disburse 95% of the 2024 plan capital by the end of the year).

Although the plan capital was lower than in 2023, localities also did not allocate all the plan capital to projects (only allocating 93.7% of the central government’s investment capital plan and 79.28% of the local re-borrowed capital plan) mainly because the projects had ended and there was no more need for disbursement, or the projects had not completed the adjustment procedures, so there was no basis for allocating the plan capital. In terms of disbursement, 6/53 localities had a disbursement rate of over 60%, but there were still 05/53 localities that had not disbursed the 2024 plan capital.

According to Mr. Hoang Hai – Deputy Director of the Department of Debt Management and External Finance (Ministry of Finance), through practical work, the Ministry of Finance has identified a number of problems. In addition to the difficulties in the implementation and disbursement under the responsibility of the Provincial People’s Committees and the Project Management Boards, there are also long-standing problems such as site clearance; problems in the bidding or commercial contract stage; slow progress in acceptance and payment, or lack of capital plans (both allocation and re-lending) are also mainly under the responsibility of the Provincial People’s Committees and the Project Management Boards when they make capital plans that are not suitable to the project implementation progress and the amount of capital needed for disbursement, especially for projects that will complete disbursement in 2024, the situation of localities continuing to disburse foreign borrowed capital slowly is also because many projects (22% of projects under disbursement) need to adjust investment policies, project adjustments, extension of disbursement, extension of implementation time, and request to use surplus capital.

“Achieving a disbursement rate of 95% of the assigned plan capital in 2024 for ODA and preferential foreign borrowed capital as directed by the Prime Minister is not simple when there is not much time left until the end of the year. Therefore, the Ministry of Finance requests that localities agree and implement the mentioned solutions to achieve the highest possible disbursement rate,” said Mr. Hoang Hai, Deputy Director of the Department of Debt Management and External Finance.

From the perspective of a locality, Mr. Le Sy Tien, Deputy Head of the Foreign Economic Relations Department (Hanoi Department of Planning and Investment), said that in 2024, Hanoi’s six ODA projects were assigned an ODA capital plan of VND 3,895.5 billion, meeting the disbursement needs of the projects. It is estimated that by January 31, 2025, the disbursement of ODA capital for the 2024 plan will be about VND 2,944.8 billion, reaching 75.59% of the plan.

According to Mr. Le Sy Tien, the estimated disbursement of the 2024 plan for ODA allocation is low due to the difficulties of the Nhon – Hanoi Metro Line 3 Project, which have basically been resolved. However, the adjustment of investment policies, project adjustments, and extension of loan agreements (the ADB loan agreement was only completed in June 2024) were slower than planned; for the Hanoi Metro Line Project, the procedure for adjusting the investment policy of the Nam Thang Long – Tran Hung Dao section took a long time, so the project has not been implemented up to now.

In Binh Thuan, according to a representative of the province, the expected disbursement of ODA capital by the end of 2024 will reach 41.42% of the total allocated capital. The province is currently implementing four projects using ODA capital with many difficulties. Accordingly, one project is facing an increase in total investment due to increased compensation costs; the province is requesting approval for an increase in total investment and is waiting for approval before proceeding…

A representative of Nghe An said that out of a total of six projects using foreign capital currently being implemented, three projects were allocated foreign capital plans for 2024 and the remaining three projects were not allocated capital plans. Among them, two projects borrowing capital from the German Government have just completed the adjustment of investment policies and extension of implementation time, so there is no need for capital in 2024; one project borrowing capital from the World Bank has just completed the signing of the loan agreement in August 2024 and is currently implementing related contents. Nghe An strives to achieve a disbursement rate of about 50% from borrowed capital sources by the end of 2024.

Mr. Hoang Hai said that in the coming time, the Ministry of Finance will continue to minimize the time for processing withdrawal applications (within one working day for direct withdrawal and temporary advance). At the same time, it will directly work with project management boards and localities to promptly remove difficulties and obstacles in disbursement; continue to discuss with donors to remove obstacles on the donor side, such as shortening the time and simplifying the procedures for providing non-objection opinions.

The Ministry of Finance requested that the Ministry of Planning and Investment support localities to speed up the progress and procedures for extending the time for capital allocation to avoid affecting the disbursement progress of projects. Quickly carry out the procedures for supplementing the medium-term capital plan, the capital allocation plan for localities to complete the procedures and meet the conditions for supplementary capital allocation.

For localities and Project Management Boards, Mr. Hoang Hai recommended that they should prepare dossiers for immediate disbursement after being assigned supplementary capital plans; promptly report the completion of expenditure vouchers from temporary advance accounts, ensuring compliance with regulations…For projects with difficulties in investment preparation and implementation, localities and Project Management Boards are responsible for promptly completing investment, construction, site clearance and resettlement procedures to implement projects; complete technical designs, resolve difficulties and obstacles in contract bidding; and soon handle problems arising in each stage of project implementation.

Nhat Quang